Coal India Plans JV With Indonesian Mining Company

NEW DELHI -- Coal India Ltd. plans to ask the Indonesian government to allocate it a coal mine, and also seek approval to set up a joint venture with a state-run mining company there.

ENLARGE

India is facing a coal shortage even as it tries to boost electricity generation capacity.
Getty Images

Coal India will ask for the approvals at an October meeting of a coal working group set up by the two countries, Interim Chairman
Nirmal Chandra Jha
said recently.

He didn't name the Indonesian company or specify the reserves of the mine that Coal India is targeting.

The proposed Indonesian venture will come after a brief overseas pause for Coal India, the world's largest producer of the fossil fuel.

The company has halted its overseas acquisition plans due to delays in getting government approvals. The coal ministry last year told Coal India to invest only in listed overseas companies after allegations of corruption rocked the federal government.

Coal India has so far succeeded in getting allocation of only two blocks in Mozambique. But it now hopes to get allocation in Indonesia, Mr. Jha said.

But he added that the Indonesia plans will be finalized only after studying upcoming changes in mining regulations.

Jakarta plans to introduce a law this year which will make exports of high-grade coal expensive by linking the rates with benchmark international indexes.

But Mr. Jha is optimistic.

"Indonesia is rich in coal reserves... Coal exports are important to its [Indonesia's] economy. I am sure its lawmakers have that in mind," Mr. Jha said.

Wednesday, Mr. Jha said coal production in Mozambique is expected to start by 2015, and that his company plans to produce five million tons each year from the two blocks, which have total estimated reserves of one billion tons.

He said Coal India will continue to scout for coal assets overseas, but added that "new regulations, taxes will continue to be a threat."

For instance, Australia is planning to impose a carbon tax on mining activities, which could make exports expensive.

India, the world's second-fastest growing major economy, is facing a coal shortage even as it tries to boost electricity generation capacity. About 55% of India's power-generation capacity of 181.56 gigawatt is based on thermal coal.

Wednesday, India Coal Minister Sriprakash Jaiswal said the coal shortage for this financial year through March is expected to fall to 114 million tons from an earlier expected 142 million tons due to a release of stocks by Coal India.

Mr. Jha said Coal India hopes to short-list a few proposals from the 16 received from five overseas suppliers. But most of the proposals aren't offering discounts to international rates.

This copy is for your personal, non-commercial use only. Distribution and use of this material are governed by our Subscriber Agreement and by copyright law. For non-personal use or to order multiple copies, please contact Dow Jones Reprints at 1-800-843-0008 or visit www.djreprints.com.